Sotherly Hotels Inc.

Good morning and welcome to the Southerly Hotels first quarter 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mac Sims, Vice President of Operations. Please go ahead.

Thank you and good morning, everyone. If you did not receive a copy of the earnings release, you may access it on our website at southerlyhotels.com. In the release, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Any statements made during this conference call, which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained. Factors and risks that can cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in today's press release and from time to time in the company's filings with the SEC. The company does not undertake a duty to update or revise any forward-looking statements. With that, I'll turn the call over to Scott.

Thanks, Mac. Good morning, everyone. I'll start off today's call with a review of our portfolio's key operating metrics for the quarter, which we are pleased to report exceeded our expectations and provided us some initial confidence that sustained recovery is now underway for our industry. Looking at results for the composite portfolio, RevPAR decreased 26% over prior year, reflecting a 21.1% decrease in occupancy and a 6.1% decrease in ADR. Looking at RevPAR versus the comparable period in 2019, RevPAR decreased 45.7% over Q1 2019, reflecting a 40.2% decrease in occupancy and a 9.1% decrease in ADR. These metrics were ahead of the U.S. lodging industry, the upper upscale segment, and most of our REIT peers that have reported thus far for the quarter. The results were also better than our market competitors, as our portfolio gained 630 basis points in RevPar share from their competitive sets in the quarter, with a solid mix of occupancy and ADR share capture at most hotels. Despite the lingering impact from the pandemic on our industry, we were pleased to see that leisure travel, business, and group demand all demonstrated steady improvement throughout the quarter. Examining RevPAR results on an absolute basis for our composite portfolio highlights the quarter's continuous improvement, as RevPAR in January increased 39.9% month-over-month to $50.38. February RevPAR increased 25.8% month-over-month to $63.38. And then March RevPAR increased 33.4% month-over-month to $84.52. January results finished stronger than expected, fueled by leisure demand in our warm weather locations and a significant government contract at our two Washington, D.C. area properties. Moving into February, the Super Bowl in Tampa provided a boost for Hotel Alba, but that was just the beginning of the improved results as several of our coastal leisure destinations showed strong pickup and some properties started to see small pockets of group and business travel return. March results exhibited similar improvements as more of our portfolio began to benefit from warmer spring weather throughout the southern U.S., which further fueled leisure travel. I will also note that April results have continued to follow the trend seen in first quarter, with REVPAR for the composite portfolio increasing an estimated 8.6 percent over March, up to nearly $92. While the continued strength in leisure demand has provided a tailwind to start the recovery, we are encouraged by the improvement in the group and business travel segments. which we believe suggests that we are entering a sustained recovery as a company and as an industry. While we believe transient leisure travel will provide a considerable base of business through the fall, we firmly believe bookings for the group and business traveler segments will stick and strengthen during the second half of the year as more of the population becomes vaccinated and meeting planners and corporations feel more comfortable with travel. Dave will provide more detail on this regard later in the call. Next, I would like to take a moment to recognize our management's commendable operating results during the quarter in regard to margin control. Our operators maintained tight cost control measures in order to mitigate the impact of lost revenue and increase flow through savings. Despite the challenges of the current labor market due to enhanced unemployment benefits, our managers were able to align hiring and payroll to match the recovery in demand. Our operators gradually rolled out guest amenities relative to the return of business while focusing on higher profit revenue drivers. As a result of these strategic measures, our portfolio exhibited strong flow through savings as the composites portfolios hotel EBITDA declined only 17% over last year on 39.2% less revenue for the quarter. This resulted in hotel EBITDA margins expanding 500 basis points year over year. When referencing these year over year comparisons, I think it's important to remind everyone that January and February of 2020 was a pre-pandemic period or otherwise normal for our industry. thus making the comparable difficult and making some of these quarterly results even more impressive. Turning to corporate activity, we've continued to work with our lenders and to date have successfully completed a variety of modification and forbearance agreements across the majority of the portfolio, which generally allows us to defer payments of principal and or interest for periods that began back in April 2020 and that extend through various dates ending between February 2021 and December 2021. They also waive or modify covenants in order to keep the loans in compliance. To that end, on April 30th, we entered into a loan modification agreement with the mortgage lender and special servicer for the Doubletree Resort by Hilton in Hollywood Beach, which brought that loan back into compliance. This is the only loan that had previously unresolved lender negotiations, so we were pleased to put this one behind us and ensure that all of our mortgages are in good standing going forward. As we enter the recovery phase, we believe it is likely that we are nearing the end of additional forbearance from the lending community. However, we will continue to evaluate on a case-by-case, property-by-property basis and address those matters with individual lenders depending on the circumstances. Regardless, we believe the modifications reached with our lending partners over the past 14 months have been critical to the health of the company and have positioned us to be able to take advantage of the recovery moving forward. I will now hand the call over to Tony.